Most emerging Asian currencies on Thursday fell as a weak China manufacturing survey increased concerns over the world's No 2 economy, adding to pressure on regional units generated by prospects of reduced inflows if the Federal Reserve scales back its stimulus. The South Korean won slid 0.6 percent to 1,120.8 per dollar as of 0220 GMT, leading losses among emerging Asian currencies. China is South Korea's top export market.
The Philippine peso fell 0.5 percent, while the Thai baht and the Malaysian ringgit lost 0.4 percent, respectively. Their depreciation came after Fed Chairman Ben Bernanke said on Wednesday that if economic improvement continued, the Fed could "in the next few meetings take a step down" in its purchases and warned that holding interest rates too low for too long has its risks.
In addition, the flash HSBC Purchasing Managers' Index for May also fell to 49.6, slipping under the 50-point level demarcating expansion from contraction for the first since October. The final HSBC PMI stood at 50.4 in April. "For Asian currencies, the days of the cheap dollar are definitely over and further downside is expected for Asia ex-Japan currencies," said Suresh Kumar Ramanathan, head of regional interest rate and FX strategy at CIMB Investment Bank in Kuala Lumpur.
Most emerging Asian currencies have been weakening this year as solid US data boosted speculation that the Fed may scale back its bond-buying programme sooner rather than later. Such a policy shift may reduce global liquidity and inflows to emerging Asian countries as it will cut yield differentials, traders and analysts have said.
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